EMPLOYMENT AGREEMENT

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Exhibit 10.7

EMPLOYMENT AGREEMENT

        THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of January 1, 2006 by and between Clean Energy Fuels Corp., a Delaware corporation ("Employer"), and James N. Harger ("Employee").

RECITALS

A.

Employee has served as Senior Vice President of Marketing and Sales of Employer and Employer desires to retain the benefit of Employee's skill, knowledge and experience in order to insure the continued successful operation of its business and that of its operating subsidiaries, and Employee desires to render services to Employer.

B.

The Board of Directors of Employer (the "Board") has determined that it is in the Employer's best interest and that of its stockholders to secure the services of Employee and to provide Employee certain additional benefits.

AGREEMENT

        In consideration of the good and valuable consideration and mutual promises and covenants contained herein, the parties agree as follows:

1.

Background:     Employee is currently employed by Employer as its Senior Vice President of Marketing and Sales. Except as noted herein, this Agreement supersedes all prior written and oral agreements between Employer and Employee and Employer's employment manual as to Employee in their entirety.

2.

Term:     Employer agrees to employ Employee and Employee agrees to serve Employer, in accordance with the terms of this Agreement, for a term commencing on January 1, 2006 and ending on December 31, 2010 (the "Term"), unless this Agreement is earlier terminated in accordance with the provisions herein. This Agreement shall thereafter renew automatically for consecutive one (1) year periods (each, a "Renewal Term") unless either party gives written notice to the other party of its intent not to renew within sixty (60) days of the expiration of the Term or any Renewal Term, as applicable. Any such renewal shall be on the same terms and conditions as this Agreement.

3.

Duties of Employee:     Employee will serve as Senior Vice President of Marketing and Sales of Employer, and as such, Employee hereby promises to perform and discharge well and faithfully the duties that may be assigned to Employee from time to time which are appropriate for a senior vice president of marketing and sales of an organization the size of Employer that is engaged in the type of business engaged in by Employer and Employer agrees to assign to Employee only such duties. As Senior Vice President of Marketing and Sales, Employee shall report only to the President and Chief Executive Officer. The duties of Employee may be changed from time to time by the mutual agreement of the Employer and Employee. Notwithstanding any such change from the duties originally assigned, or hereafter assigned, the employment of Employee will be construed as continuing under this Agreement as modified. However, if Employer shall substantially reduce Employee's title, duties or compensation, then Employee shall have the option to terminate this Agreement and shall be compensated as if the Agreement was terminated in accordance with Section 5(d). Employee agrees to devote substantially all of Employee's working time and attention to Employee's duties hereunder, except for such reasonable amounts of time for personal, charitable, investment and professional activities that do not substantially interfere with the service to be rendered by Employee hereunder.

4.

Compensation:

a.

Base Salary.     During the Tam or any Renewal Term, Employer agrees to pay Employee an annual base salary of $225,000 ("Base Salary"), which shall be earned and payable in accordance with Employer's usual and customary payroll practices as in effect from time to time. Any increase in Base Salary shall be as determined from time to time in the sole discretion of the Board. Employee's Base Salary shall not be reduced below $225,000.

b.

Incentive Compensation.     Employee shall be eligible for an annual performance bonus ("Incentive Compensation") up to seventy (70%) of Base Salary. Incentive Compensation will be determined in accordance with certain financial and operational objectives to be mutually agreed upon by Employer and Employee within forty-five (45) days following the commencement of each fiscal year of Employer during the Term or any Renewal Term. Incentive Compensation for partial years will be pro-rated.

c.

Additional Benefits.     Employee shall also be entitled to participate in any pension plan, profit-sharing plan, life, medical, dental, disability, or other insurance plan or other plan or benefit as from time to time is in effect during the term of this Agreement that Employer may provide generally for management-level employees of Employer (collectively, "Additional Benefits") provided, however, that while this Agreement remains in force, Employer will provide for Employee, at Employer's expense, participation, in medical, dental and vision coverage, short-term disability, long-term disability, AD&D, and life insurance benefits on terms and in amounts not less beneficial to Employee than those provided by the plans, in effect on the date hereof, subject to a determination of Employee's eligibility under said programs in accordance with their respective terms. Said coverage will be in existence or will take effect as of the commencement of the Term and will continue while this Agreement remains in force. Employer's liability to Employee for any breach of this paragraph will be limited to the amount of premiums payable by Employee to obtain the coverage contemplated herein.

d.

Vacation.     Employee shall be entitled to twenty-five (25) business days of paid vacation each twelve (12) months of the Term or any Renewal Term, in accordance with Employer's practices and policies which are applicable to its management-level employees.

e.

Automobile.     While this Agreement remains in force, Employer shall provide Employee with a compressed natural gas operated automobile. Employer shall pay all operating expenses of any nature whatsoever with regard to such automobile. Employer shall also procure and maintain in force an automobile liability insurance policy on such automobile, with coverage including Employee, for comprehensive with extended coverage, collision for actual cash value, and for bodily injury, death or property damage, with a combined limit of no less than $5,000,000 for bodily injury and for property damage, plus coverage for any excess liability under Employer's umbrella liability policy in place from time to time. In the event that Employee shall incur additional income tax liability as a result of Employee's use of the subject automobile, Employee's Base Salary shall be increased to the extent necessary to reimburse Employee for such additional tax.

5.

Termination.     The compensation and other benefits provided to Employee pursuant to this Agreement, and the employment of Employee by Employer, shall be terminated only as provided in this Section 5.

a.

Death.     If Employee's employment hereunder is terminated by reason of Employee's death, this Agreement shall terminate without further obligations to Employee (or Employee's heirs or legal representatives) other than for (1) payment of the sum of (A) the Base Salary through the date of termination and any Incentive Compensation for the prior year to the extent not theretofore paid, (B) any compensation previously deferred by Employee (together with any accrued interest or earnings thereon), and (C) any accrued vacation pay to the extent not theretofore paid which shall be paid to Employee or Employee's estate or beneficiary, as applicable, in a lump sum in cash within ten (10) days after the date of termination or any

earlier time period required by applicable law; (2) payment to Employee, or Employee's estate or beneficiary, as applicable, of any amount due pursuant to the terms of any applicable benefit plan; and (3) after the end of the calendar year of Employee's death, payment of a prorated portion, based on the number of weeks during the year in which Employee was employed by Employer, of the Incentive Compensation that would he payable in respect of such year (based on the criteria applicable for that year).

b.

Disability.     If the Board determines that Employee has become permanently disabled, which shall be defined as the Employee's inability because of illness or incapacity, substantiated by appropriate medical authority, to render services of the character contemplated by this Agreement over a period of six (6) consecutive months, then Employee's employment shall terminate without further obligations to Employee (or Employee's heirs or legal representatives) under this Agreement, other than for (1) payment of the sum of (A) the Base Salary through the date of termination and any Incentive Compensation for the prior year to the extent not theretofore paid, (B) any compensation previously deferred by Employee (together with any accrued interest or earnings thereon), and (C) any accrued and unpaid vacation pay, which shall be paid to Employee or Employee's estate or beneficiary, as applicable, in a lump sum in cash within ten (10) days after the date of termination or any earlier time period required by applicable law; (2) payment to Employee or Employee's representative, as applicable, of any amount due pursuant to the terms of any applicable benefit plan; and (3) after the end of the calendar year of Employee's disability, payment of a prorated portion, based on the number of weeks during the year in which Employee was employed by Employer, of the Incentive Compensation that would be payable in respect of such year (based on the criteria applicable for that year).

c.

For Cause.     Employee's employment hereunder shall be terminated and all of Employee's rights to receive Base Salary and Incentive Compensation (except as accrued and unpaid to the date of termination), and (subject to the terms of any plans relating thereto) Additional Benefits hereunder, in respect of any period after such termination, shall terminate upon a determination by Employer, acting in good faith, that Employee (1) has committed a material act of dishonesty against Employer, (2) has been convicted of a felony involving moral turpitude or (3) has committed a material breach of Sections 7(f), 7(g), 7(h), or 7(i) of this Agreement.

d.

Without Cause.     Notwithstanding any other provision of this Section 5, the Board shall have the right to terminate Employee's employment with Employer at any time, but in the event of such termination, Employee shall be entitled to receive (1) a lump sum payment of an amount equal to the sum of (A) the Base Salary through the date of termination and any Incentive Compensation for the prior year to the extent not theretofore paid, (B) any compensation previously deferred by Employee (together with any accrued interest or earnings thereon), (C) one hundred percent (100%) of one (1) years current Base Salary, (D) one hundred percent (100%) of the previous year's Incentive Compensation, and (E) any accrued vacation earned and not paid as of the termination date, and (2) after the end of the calendar year of Employee's termination, payment of a prorated portion, based on the number of weeks during the year in which Employee was employed by Employer, of the Incentive Compensation that would be payable in respect of such year (based on the criteria applicable for that year). Furthermore, Employee shall receive continuing participation for a period of one (l) year from the date of termination at Employer expense in those Additional Benefits in which Employee was enrolled at the time of such termination. In consideration of the receipt of the severance benefits described in this paragraph, and as a precondition to their receipt, Employee agrees to execute a release in the form attached hereto as Exhibit A (the "Release"). Employee shall be granted a twenty-one (21) day period (or any other time period required by applicable law) in which to review and study the Release and consult with an attorney prior to executing the Release. The severance benefits described in this Section 5(d) shall be payable to Employee

within eight (8) days (or any other time period required by applicable law) after Employee's execution of the Release.

e.

Voluntary Departure

i.

No Change In Control.     If there has not been a Change in Control (as defined in Section 5(f)(i)(A) below) of Employer and Employee's employment hereunder shall cease due to Employee's voluntary departure, all of Employee's rights to receive (1) Base Salary, other than earned through the date of termination and not theretofore paid, (2) Additional Benefits (subject to the terms of any plans relating thereto), and (3) Incentive Compensation (except as earned and not paid from the prior year) that would be payable in respect of the year in which such voluntary termination occurred, shall immediately cease.

ii.

Change In Control.     If there has been a change in control (as defined in Section 5(f)(i)(A) below) of Employer and Employee's employment shall cease due to Employee's voluntary departure within one (1) year of the Change in Control, Employee shall be entitled to receive (1) a lump sum payment of an amount equal to the sum of (A) the Base Salary through the date of termination and any Incentive Compensation for the prior year to the extent not theretofore paid, (B) any compensation previously deferred by Employee (together with any accrued interest or earnings thereon), (C) one hundred percent (100%) of one (1) years current Base Salary, (D) one hundred percent (100%) of the previous year's Incentive Compensation, and (E) any accrued vacation earned and not paid as of the termination date, and (2) after the end of the calendar year of Employee's termination, payment of a prorated portion, based on the number of weeks during the year in which Employee was employed by Employer, of the Incentive Compensation that would be payable in respect of such year (based on the criteria applicable for that year). Furthermore, Employee shall receive continuing participation for a period of one (1) year after the date of termination at Employer expense in those Additional Benefits in which Employee was enrolled at the time of such termination. In consideration of the receipt of the severance benefits described in this paragraph, and as a precondition to their receipt, Employee agrees to execute a release in the form attached hereto as Exhibit A (the "Release"). Employee shall be granted a twenty-one (21) day period (or any other time period required by applicable law) in which to review and study the Release and consult with an attorney prior to executing the Release. The severance benefits described in this Section 5(e)(ii) shall be payable to Employee within eight (8) days (or any other time period required by applicable law) after Employee's execution of the Release.

f.

Involuntary Departure After Change in Control (subject to the limitations of Section 5(f)(ii):

i.

If, otherwise than as a result of the exchange of stock of the Employer for cancellation of indebtedness, or a restructuring arrangement entered into for the benefit of Employer's creditors,

A.

Any "person", other than an existing shareholder of Employer as of January 1, 2006, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of the Employer representing 50% plus one share, or more, of the combined voting power of the Employer's then outstanding securities (for purposes of this Section 5(f)(i), the term "person" shall mean a person as defined or referred to in Section 3(a)(9) and/or 13(d)(i), et seq. of the Securities Exchange Act of 1934, as amended, and the associated rules of the Securities and Exchange Commission promulgated thereunder); and

B.

such "person" elects not to continue Employee's employment with the Employer within 1 year of the date of the Change in Control,

notwithstanding any other provision of this Agreement to the contrary and as a substitute therefor, Employee shall be entitled to receive (1) a lump sum payment of an amount equal to the sum of (A) the Base Salary through the date of termination and any Incentive Compensation for the prior year to the extent not theretofore paid, (B) any compensation previously deferred by Employee (together with any accrued interest or earnings thereon), (C) one hundred fifty percent (150%) of one (1) years current Base Salary, (D) one hundred fifty percent (150%) of the previous year's Incentive Compensation, and (E) any accrued vacation earned and not paid as of the termination date, and (2) after the end of the calendar year of Employee's termination, payment of a prorated portion, based on the number of weeks during the year in which Employee was employed by Employer, of the Incentive Compensation that would be payable in respect of such year (based on the criteria applicable for that year). Furthermore, Employee shall receive continuing participation for a period of one (1) year from the date of termination at Employers expense in those Additional Benefits in which Employee was enrolled at the time of Employee's termination. In consideration of the receipt of the severance benefits described in this paragraph, and as a precondition to their receipt, Employee agrees to execute a release in the form attached hereto as Exhibit A (the "Release"). Employee shall be granted a twenty-one (21) day period (or any other time period required by applicable law) in which to review and study the Release and consult with an attorney prior to executing the Release. The severance benefits described in this Section 5(f)(i) shall be payable to Employee, within eight (8) days (or any other time period required by applicable law) after Employee's execution of the Release.

ii.

Anything in this Agreement to the contrary notwithstanding, in the event that any payment to or for Employee's benefit under Section 5(f)(i) (whether payable pursuant to the terms of this Agreement or otherwise) would not be deductible by Employer as a result of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), then the aggregate amount payable under Section 5(f)(i) shall be reduced (but not below zero dollars) so that after giving effect to such reduction, no payment made to or for the Employee's benefit will not be deductible because of Section 280G. If the Employee establishes (in accordance with Section 280G) that all or any portion of the aggregate "parachute payments" (as defined in Section 280G) payable to or for the Employee's benefit constitutes reasonable compensation for services actually rendered, and if the present value of all such "parachute payments" which do not constitute reasonable compensation exceeds 299% of the Employee's "base amount" (as defined in Section 280G), then the Employee shall be entitled to receive an amount equal to (but not greater than) the present value of all such "parachute payments" which constitute reasonable compensation. For purposes of this Section 5(t)(ii), the "present value" of any payment shall be determined in accordance with Section 1274(b)(2) of the Code. If it is established that, notwithstanding the good faith of Employee and the Employer in a